Tax Cuts and Jobs Act Nearly Doubles, to $11,180,000, the Applicable Federal Estate Tax Exclusion Amount and GST Exemption for 2018

The new Tax Cuts and Jobs Act of 2017 (“2017 Tax Cuts Act”) P.L. 115-97, doubled the Estate and Gift tax “Applicable Exclusion Amount,” from $5 million to $10 million, for gifts made, and estates of decedents dying, after December 31, 2017, and before January 1, 2026. (These amounts were previously adjusted for inflation.) By increasing the applicable exclusion amount, the new law automatically increases the Generation Skipping Tax (“GST”) exemption. Code Sec. 2631(c). See my prior article entitled, “Tax Provisions Impacting Estate Planning In the New Tax Act.”

However, the 2017 Tax Cuts Act changed the inflation index used after 2017 for the applicable exclusion amount and GST exemption.

The IRS recently confirmed that the new law’s doubling of the basic exclusion amount, when adjusted for inflation based on the new index, produces a $11,180,000 Exemption figure for 2018. This is slightly less than double the $5,600,000 figure that the IRS had announced before enactment of the Tax Cuts and Jobs Act.

This new figure reflects the application of the new C-CPI-U inflation factor to the 2018 adjustments for the applicable exclusion amount.

The bottom line is, clients having aggregate estates valued less than $11,180,000 will not need to worry about the Federal Estate or Gift Tax for the next 10 years (when the current law sunsets). (Don’t forget, life insurance death benefits are included in your taxable estate.)

Please call or email us if you have questions about the new Exemption Amount and how it impacts your current Estate Plan. We offer a free one hour estate planning consultation for any client wishing to discuss their estate planning needs.